Rich Dad’s Financial IQ Cultivation: Stock Fundamentals

Chapter 19 How to Trade Stocks (3)
(4) The trading order is transmitted to the host computer of the exchange, and after acceptance, the trading order return form is printed by the printer of the securities firm participating in the trading.

(5) Buy and sell orders are limited to one type of price limit order.

(6) Securities firms shall inquire about their unexecuted trading orders through terminals.

(7) When applying for cancellation of transaction declaration, it should be canceled through the terminal.When applying for modification of the transaction declaration, in addition to reducing the number of declarations, the original transaction declaration should be canceled first, and then re-declaration.

2. The market display is divided into a public display screen and a professional display screen.

The public display screen is located in the centralized trading market of the Shenzhen Stock Exchange and the business halls of various securities firms.During the market meeting time, the public screen shall display the transaction price at any time, and the display of the purchase and sale order price shall be based on the latest transaction price in the current market, and the highest bid price and the lowest bid price shall be reported.

The professional screen is displayed through the operation terminal of the securities firm, and can reveal all the declarations surrounding the latest transaction price up and down two units at any time.

3. After the securities firm's buying and selling orders are accepted by the computer host of the exchange, the exchange host will automatically match the transaction from the time of the market meeting.

4. Decide on the principle of priority order for purchase and sale declarations.

(1) Price priority

(2) Time priority

(3) Customer entrustment priority

5. Bidding method for buying and selling declarations

There are two bidding methods for buying and selling declarations: call bidding and continuous bidding.There are two methods of call auction for opening or closing.When the market closes, call auctions will start 10 minutes before the market closes.

6. Call auction and continuous auction

The opening price of initial listing or listing after ex-right and ex-dividend is generated through call auction.If the opening price is generated by call auction, the unexecuted buy and sell orders are still valid, and the auction will continue according to the original input sequence.

If the opening price cannot be determined through call auction, the opening price shall be determined through continuous auction.

7. During continuous bidding, the price is determined according to the following principles within the last transaction price in the current market or within two consecutive units of rise and fall of the published price at that time.

(1) The highest buy order and the lowest sell order price are traded first.

(2) When the declared price of the buyer (seller) is higher (lower) than the declared price of the seller (buyer), the transaction price that is closer to the latest transaction price in the current market or the price disclosed at that time shall be adopted.

8. Once the transaction report is completed, the transaction report will be printed through the printer of the securities firm participating in the transaction.

9. Transaction report

The items of the transaction report form shall include the securities firm code, power of attorney number, type of entrustment, securities code, transaction quantity, transaction price, transaction amount, transaction type, agency or self-operated, and transaction time.

To sum up, the basic process of a securities firm's transaction is: the securities firm sends a notice to its representative or agent on the stock exchange, and the representative (market representative) understands the market, bargains, and concludes the transaction.

(Section [-]) Clearing and Delivery
[-]. Liquidation
([-]) Liquidation procedures

The clearing business of the stock exchange is handled according to the principle of "net settlement", that is, during a clearing period (each opening day is a clearing period) for each securities firm, the clearing department of the stock exchange must first check the transaction on the market. Fill out the liquidation sheet for each securities firm to check whether there is any error in the sheet.For the liquidation of the transaction price, after the receivable and payable prices are offset, only the net balance after netting is calculated.For the liquidation of buying and selling stocks, after offsetting the amounts receivable and payable for the same stock, only the net balance after netting will be counted.The liquidation work is organized by the stock exchange, and all securities firms uniformly treat securities transactions as intermediaries for liquidation, instead of offsetting and liquidating between securities firms and securities firms.As the intermediary of liquidation, the exchange pays the stock seller and collects money from the stock buyer when the price is cleared; when the stock is cleared and delivered, it receives the stock from the stock seller and pays the stock buyer. .

([-]) Some provisions on liquidation

my country's Shanghai and Shenzhen stock exchanges have implemented the following systems for liquidation after the transaction:
1. Set up a clearing account system

Securities firms operating stock trading business on the stock exchange must concentrate on opening a clearing account in the clearing department of the stock exchange.Due to the current conditions in our country, all exchanges require securities firms to open a clearing account at the business department of the People's Bank of China, and maintain a sufficient balance in the account to ensure the transfer of price for the same day clearing and delivery time.

2. Stock centralized storage system

Its main method is: in addition to deducting a part of its own stocks for self-operated business needs, each securities firm deposits most of them in the centralized storage of the stock exchange, and only stocks approved for listing are included in the warehouse.The delivery of stocks is completed by the stock exchange through the transfer of inventory accounts, that is, when each securities firm handles the delivery of various stocks on the delivery day, only the clearing department of the exchange needs to follow the "clearing and delivery form" of the various stocks that should be paid. The quantity received or payable can be transferred in the separate accounts of the respective inventory stocks, that is, "moving accounts and not moving stocks".If a securities firm does not participate in the centralized storage and cannot complete the delivery through the inventory account transfer, the securities firm must bear all the matters of delivering or withdrawing the stocks.

3. Liquidation delivery reserve system

The purpose of implementing the delivery reserve system is to ensure the normal and smooth progress of liquidation and delivery, as well as the continuity, timeliness and safety of liquidation.The Shenzhen Stock Exchange stipulates that all securities firms must pay RMB 25.Each securities firm shall not fail to perform the liquidation obligation for any reason, nor shall it fail to perform the liquidation obligation due to entrustment breach.If the securities firm fails to fulfill this obligation, the stock exchange clearing department has the right to use the liquidation reserve deposited by the securities firm to pay in advance, and the price difference and all expenses and losses arising therefrom shall be borne by the defaulter.

According to the regulations of the stock exchange, under normal circumstances, the transaction on the same day is the liquidation period; securities firms are not allowed to refuse liquidation due to the default of the client.

([-]) Significance of liquidation
Liquidation is a procedure in which the quantity and amount of stocks bought and sold are offset separately, and then the net difference in stocks or price is delivered through the stock exchange.The significance of liquidation is to reduce the price and price of stocks actually delivered through the stock exchange at the same time, saving a lot of manpower, material resources and financial resources.If the stock exchange is not cleared, each securities firm must deliver the stock and price to the other party one by one. The procedures are quite cumbersome and take up a lot of manpower, material resources, financial resources and time.

[-]. Delivery

After the stocks are cleared, the delivery procedures will be handled.The so-called delivery means that the seller delivers the stock to the buyer and the buyer pays the price to the seller.

([-]) Delivery procedures

Delivery is divided into two procedures:

1. Delivery by securities firms
When the market is closed every day, the clearing department of the stock exchange calculates the net amount after offsetting the receivables and payables of each securities firm and various For the net balance of securities receivables and payables, prepare the “Clearing and Delivery Summary Form” on the day and the “Clearing and Delivery Form” of each securities firm, and distribute them to the clearing and delivery personnel of each securities firm.After receiving the "Clearing and Delivery Form" and verifying that it is correct, the liquidation personnel of each securities firm must prepare the company's "Delivery List" for the day and go through the delivery procedures.When handling price delivery, the delivery procedures shall be completed in accordance with the following regulations:
(1) For the price payable, an account transfer voucher shall be issued for the full amount of the delivery amount to the account of the stock exchange in the business department of the People's Bank of China, and the clearing department of the exchange shall send it to the business department for transfer.

(2) For the price payable, the clearing department of the exchange will issue a transfer voucher for the full amount and send it to the business department for transfer procedures.

When handling securities delivery, follow the following regulations:

(1) For securities payable, send the securities payable to the clearing department of the exchange in full.

(2) Those who are receivable of securities shall withdraw the securities from those payable by themselves with the "Securities Delivery Withdrawal Note" issued by the exchange.

Since the exchanges often set up centralized custody control, the delivery of securities can be completed through the transfer of the exchange inventory account.

2. The securities firm sends the customer a transaction confirmation letter
The market-exiting representative of a securities firm shall immediately notify his securities firm and fill in a buy (sell) confirmation form after the transaction is completed on the exchange.

The Shenzhen Stock Exchange stipulates that once a transaction is completed, the market representative should notify its business place as soon as possible to prepare a transaction report, notify the consignor (or make an announcement in some form) on the second business day after the establishment, and Handover procedures will be handled in the afternoon of the following day.The trading report shall be prepared in accordance with the uniform format prescribed by the Exchange.Buyers are printed in red and sellers are printed in blue.The transaction report should record the consignor’s name, shareholder code, transaction date, type of securities, number of shares or denomination, unit price, commission, handling fee, tax payment, amount receivable or payable, transaction order number, etc. .

([-]) Delivery method

Securities transactions generally have the following delivery methods:

1. Delivery on the same day
It means that the buyer and the seller complete the delivery on the same day after the transaction.Applicable to situations where the buyer is in urgent need of stock or the seller is in urgent need of cash.The Shanghai Stock Exchange currently adopts this approach.

2. Next day delivery
Refers to the completion of the delivery before noon on the next business day after the transaction. If it falls on a statutory holiday, it will be postponed by one day.

3. Delivery on the second day

That is to say, counting from the next day of the transaction, the transaction shall be completed before noon on the second business day.If it falls on a holiday, it will be postponed by one day.This delivery method is rarely used.

4. Routine delivery
That is, from the transaction date, the delivery matters shall be completed within the fifth business day.This is the standard delivery method.Generally, if the buyer and the seller do not specify the delivery method at the time of the transaction, it will be regarded as a routine delivery method.

5. Routine deferred delivery
Refers to the delivery in which the buyer and the seller agree to choose a certain day as the delivery time after the routine delivery.The buyer agrees to pay on the next day, and the seller delivers the stock to the buyer on the next day.

6. The seller chooses to deliver
Means that the seller has the right to determine the delivery date.The period ranges from 5 days to 60 days after the transaction, and both buyers and sellers must sign a written contract.When buying "delivery at the seller's option" at the same price, the one with the longest term shall have the priority.Where the "seller chooses to deliver" is sold at the same price, the one with the shortest time limit shall have the priority of delivery.my country has not yet adopted this delivery method.

([-]) Some regulations on delivery

For delivery, the stock exchange generally stipulates:
(1) Within the specified time on the delivery date, the buyer should send the price, and the seller should send the securities to the clearing department.

(2) When the seller delivers the securities to the buyer, it means the corresponding transfer of rights.

(3) A securities firm shall not refuse delivery due to a client's breach of contract.

(4) When a securities firm violates its obligations, the stock exchange may designate other securities firms to sell or buy on its behalf within a certain period of time before the market closes on the delivery day.The price difference, brokerage commission and other expenses shall be borne by the securities firm that violates the delivery obligation.If the transaction cannot be settled before the market closes on the delivery day, the stock exchange shall select 3-5 people from securities firms as evaluators to evaluate the price of the securities as the basis for liquidation.

(5) If a securities firm violates the delivery obligation, the stock exchange may designate other securities firms to close the various other transactions that have been completed but not yet delivered.

(6) The stock exchange may offset the amount owed by a securities firm that violates its delivery obligations from its business margin and its payables; if there is any remaining balance after the offset, it shall be repaid; The defaulting securities firm recovers.

(7) Before the settlement of the case of violation of the delivery obligation, the securities firm shall not enter the stock exchange to conduct transactions, nor shall it accept the client's entrustment.

(Section VII) Transfer

[-]. Transfer procedure
With the completion of the transaction, when the stock is transferred (sold) from the seller to the buyer, it means that the original shareholder has the right to transfer, and the new stock holder becomes the new shareholder of the company, and the old shareholder (the original shareholder) , that is, the seller) loses the rights represented by the part of the stock they sold, and the new shareholder obtains the right represented by the part of the stock he bought.However, since the names and shareholdings of the original shareholders are recorded in the shareholder register, the corresponding contents in the shareholder register must be changed, which is commonly referred to as the transfer procedure.Therefore, after the securities and prices are cleared and delivered, it does not mean the final conclusion of the securities trading procedure.

The transfer procedure of the Shanghai Stock Exchange adopts automatic computer transfer. Once the buyer and the seller make a deal, the transfer procedure has been completed.The Shenzhen Stock Exchange is also adopting advanced transfer procedures. After the transaction between the buyer and the seller, the transaction status is transmitted to the securities registration and transfer company through optical cables, and the transaction is recorded in the account opened by the shareholder.

(1) After the delivery, the original shareholder should fill out a copy of the transfer notice at the time of stock transfer, affix the seal and send it together with the stock to the transfer agency of the issuing company.

The company's transfer agency can be set up by itself, or a financial institution can be entrusted to handle it.Generally, the issuing company sets up a transfer agency at its registered residence, while in other regions, it entrusts a financial institution to handle it on its behalf.At present, my country's financial institutions generally handle it. Shenzhen is handled by securities companies, and Shanghai is handled by the stock exchange.

If there is more than one transferee of the stock, the transferor (seller) should fill out the transfer notice separately.If the transferor has more than one account, the transferor should also fill out the notice separately.

(2) After the delivery, the new shareholder should obtain two seal cards from the issuing company, affix the seal, and send them to the transfer agency of the issuing company.The seal card mainly records the name and address of the new shareholder, the number and number of shares held by the new shareholder, and the date of stock transfer.

(3) After the transfer agency receives the old shareholder's transfer notice, the old stock and the new shareholder's signature card, it will review it. If the procedures are complete, it will immediately cancel the old stock and issue a new stock, and then send the old and new stock to the visa agency and change it. Corresponding contents in the register of shareholders.The role of the visa agency is to check whether the company has overissued and counterfeit stocks.The issuing company is generally not allowed to set up a signing institution by itself, and must entrust a financial institution, and the financial institution responsible for the company's transfer procedures must not act as a visa institution.

(4) The signing agency receives the new and old stock certificates and relevant materials sent by the transfer agency for review and inspection. If the procedures are complete, it will sign the front of the new and old stock certificates, and then send them to the transfer agency.

(5) After the transfer agency receives the old and new stock certificates, it will deliver the new stock to the new shareholder, while the old stock will be archived by the transfer agency.

[-]. Precautions for transfer
During the stock transfer process, you should pay attention to:

(1) All expenses shall be borne by the issuing company.

(2) If the shareholder applies for the transfer by mail, it should be sent to the transfer agency by registered mail and mailed by ordinary mail. The issuing company will not be responsible for any loss.

(3) If the shareholder's stock certificate is lost, if sufficient proof cannot be issued, the issuing company may refuse to issue a new stock certificate.

(4) If the lost stock is picked up, it does not need to be returned, but if the original holder has signed and sealed the back of the lost stock, the issuing company will refuse to handle the transfer procedures, that is, unless the original holder agrees to no longer own the lost stock Otherwise, the company will not recognize the new holder as a new shareholder, so the new holder cannot enjoy all rights.

(5) The issuing company generally announces a period of closing the account transfer when declaring dividends. During the period of closing the account transfer, the issuing company stops handling the transfer procedures.Dividends issued by the issuing company to shareholders can also be directly transferred to the shareholder's bank account.If the old shareholders transfer their shares during this period, the new shareholders cannot receive dividends.Therefore, in the transaction, the dividend is often deducted from the transfer price as the transaction price to show fairness.

(Section [-]) Stock Trading Methods
[-]. Spot transaction

Spot trading is also called cash spot.It refers to the buyers and sellers of stocks, after negotiating a transaction.The transaction method of immediately handling the delivery procedures, that is, the seller surrenders the stock, the buyer pays, and the delivery is made on the spot, and the money and the goods are cleared.It is the oldest trading method in securities trading.Initially, securities transactions were carried out in this way.In the future, due to various reasons such as the increase of easy numbers, it will be difficult to deliver on the spot.Therefore, in the actual transaction process in the future, some flexible methods are adopted, that is, a shorter delivery period is allowed after the transaction is completed, so that large traders can reserve funds for delivery.Different countries have different regulations on this. Some require delivery on the second working day after the transaction; some require a longer period, allowing delivery to be completed within four or five days after the transaction.How many days after the transaction is completed, it is generally handled in accordance with the regulations or practices of securities transactions, which varies from country to country.

Spot trading has the following salient features:

First, transaction and delivery are basically carried out at the same time.

Second, it is a physical transaction, that is, the seller must actually transfer the securities to the buyer, without hedging.

Third, at closing, the buyer must pay cash.Due to the large amount of cash used in early securities transactions, spot transactions are also known as cash spot transactions.

Fourth, the trading technology is simple, easy to operate, and easy to manage. Generally speaking, spot trading is an investment, which reflects the purchaser's willingness to make long-term investment, and hopes to obtain a relatively stable return from securities in the future. Income such as interest or dividends, rather than speculation for profit on the difference between the purchase and sale of securities.

[-]. Futures trading

(End of this chapter)